Advantage Data: Refining, coal mining best as junk major-sector rally continues

By Paul Deckelman

New York, Dec. 23 - The high-yield market posted its sixth consecutive weekly gain during the week ended Friday, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Junk thus continues to come back from the relatively rare loss the market had posted in the week ended Nov. 8, which had snapped a winning streak of five consecutive weeks on the upside before that and nine weeks out of the previous 10.

The latest weekly advance now runs that positive trend to 11 weeks out of the last 12 and 15 weeks out of the last 17.

It was the 36th weekly improvement that the junk market has seen so far this year, versus 15 weekly setbacks.

In the latest week, 47 out of the 59 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe finished in the black, with 10 sectors ending in the red and two sectors unchanged on the week, showing neither gains nor losses.

The results did represent a moderating trend from the stronger results seen the week before, ended Dec. 13, when 54 of those sectors had recorded gains, while four sectors had suffered losses and one sector was unchanged on the week.

That less-robust trend was also seen in the behavior of the 30 most significantly sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding. In the week ended Friday, 24 out of the 30 were finishing in positive territory, with four sectors in negative territory and two sectors unchanged.

That was a retreat from the previous week, when 28 of the 30 sectors had closed in the black, one sector ended in the red and one was unchanged.

Among specific major sectors in the latest week, bonds of petroleum refining and coal mining companies had the best showings; lodging turned in the worst performance.

Index improvement continues

Statistical indicators of general market performance were meanwhile mixed versus the previous week for a third straight week, after having been higher across the board for the two weeks before that.

But the total year-to-date return, as measured by the widely followed Merrill Lynch High Yield Master II index, posted its sixth consecutive weekly gain. Those advances had followed a loss in the week ended Nov. 8, which, in turn, had come after the index had racked up five straight weeks of gains before that.

At the close on Friday, the index showed junk bonds having risen by 0.165% on the week, on top of the previous week's improvement of 0.106%.

The index has now seen 32 weekly gains so far in 2013 against 19 losses. It had finished 2012 with 40 weekly gains versus 12 losses.

As of Friday, the index's year-to-date return had firmed to 7.151%, up from 6.975% the prior Friday and a new peak level for 2013.

Those levels all remained well above the index's 2013 low point of 0.384%, recorded on June 25, but well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 103.3276 on Friday, up from 103.298019 a week earlier. Those levels meanwhile remain well under the highest average price for the year of 107.222488, set on May 9.

The index's yield to worst stood at 5.626%, down from 5.651% a week earlier. While having come in markedly from its high point for the year of 6.853%, set on June 25, it still remained above its low yield for the year of 4.986% on May 9 - which was also the lowest all-time yield as well.

Its spread to worst over comparable Treasury issues stood at 422 basis points, in from 428 bps the week before and a new tight point for the year, having come in smartly from its 2013 wide point of the year of 536 bps, set June 25.

Refining on the rise

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of petroleum refiners as the best performer among the significantly sized groupings, with a 1.65% gain on the week. It was the second consecutive week the refiners had been among the top finishers, having also been there in the week ended Dec. 13 with a 0.26% return.

Also among the Top Five best-performing sectors on the week were coal mining (up 0.36%), non-computer electronics manufacturing (up 0.30%), food stores (up 0.29%) and metals mining (up 0.28%).

Like the refiners, all of those sectors had been among the strongest performers the week before.

The coal miners and the grocers were each among the best sectors for a second straight time, having been there the previous week with returns of 1.09% and 0.27%, respectively, while the electronics manufacturers and the metals miners both made it three weeks in a row among the elite finishers; both had returned 0.27% the week before.

On the downside, lodging was the worst-performing major sector this past week, posting a 0.65% loss.

Other underperformers were the holding companies and other investment offices sector and health care services, both of which were down 0.07%, non-depository credit unions (down 0.01%) and the business services and precision instrument manufacturing sectors, both of which were unchanged on the week.

Health care and precision instrument manufacturing had each been among the Bottom Five worst-performing sectors the week before, when they were down 0.01% and up 0.08%, respectively.

Grocers show gains for year

Fifty one weeks into 2013, the food stores sector remained the clear leader among the key sectors on a year-to-date basis for a 49th straight week, posting a cumulative return of 20.23%. It was the first, and for most of the year had been the only, major sector to hit double digits on a percentage basis this year.

Also in that elect circle this week was non-computer electronics manufacturing (up 10.21%), which rose two notches to the year-to-date runner-up spot after having been just fourth-best the week before.

Depository financial institutions (up 9.92%) fell one position into third-best on the year, after having previously been second-best for three consecutive weeks.

Printing and publishing (up 8.65%) was fourth-fourth strongest for the year, despite having not been among the year-to-date leaders the week before.

Health care services (up 8.59%) was the fifth-strongest sector on the year for a second straight week.

On the downside, lodging - the week's worst performer among the significantly sized sectors, as noted - was also the worst on a cumulative return basis, up just 2.62% on the year. It had fallen by one position into the absolute cellar, after having been merely second-worst the week before.

Petroleum refining (up 3.37%), despite its showing as best weekly performer among the major sectors, was second-worst on the year, despite having not been among the year-to-date underachievers the week before.

Coal mining (up 4.39%) improved by two notches, relatively speaking, rising to just third-worst from the worst the week before. Coal has been at the bottom of the pile, or at best not too far above it, for most of the year, one point earlier in the year having spent a full 21 straight weeks as the absolute worst-performing significantly sized sector. That stretch included six straight weeks during which it had actually been showing red ink for the year rather than just relatively small cumulative gains.

Electric and gas utilities (up 4.46%) moved up one notch to just fourth-worst on the year, after having been third-worst for two straight weeks; before that, it had been the second-worst year-to-date performer among the key sectors for 18 straight weeks.

Food manufacturing (up 5.24%) rose by one slot to fifth-worst, after having been fourth-worst the week before.

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